CONFORMED COPY

LOAN NUMBER 8074-BR

Loan Agreement

(Federal Integrated Water Sector Project –

Programa de Desenvolvimento do Setor Água - Interáguas)

between

FEDERATIVE REPUBLIC OF BRAZIL

and

INTERNATIONAL BANK FOR RECONSTRUCTION

AND DEVELOPMENT

Dated December 15, 2011

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LOAN AGREEMENT

Agreement dated December 15, 2011, between FEDERATIVE REPUBLIC OF

BRAZIL (Borrower”) and INTERNATIONAL BANK FOR RECONSTRUCTION AND

DEVELOPMENT (“Bank”). The Borrower and the Bank hereby agree as follows:

ARTICLE I — GENERAL CONDITIONS; DEFINITIONS

1.01. The General Conditions (as defined in the Appendix to this Agreement)

constitute an integral part of this Agreement.

1.02. Unless the context requires otherwise, the capitalized terms used in this

Agreement have the meanings ascribed to them in the General Conditions or in

the Appendix to this Agreement.

ARTICLE II — LOAN

2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or

referred to in this Agreement, the amount of one hundred and seven million,

three hundred thirty two thousand and five hundred Dollars ($107,332,500), as

such amount may be converted from time to time through a Currency Conversion

in accordance with the provisions of Section 2.07 of this Agreement (“Loan”), to

assist in financing the project described in Schedule 1 to this Agreement

(“Project”).

2.02. The Borrower may withdraw the proceeds of the Loan in accordance with

Section IV of Schedule 2 to this Agreement The Borrower’s Representative for

purposes of taking any action required or permitted to be taken pursuant to this

Section is: (a) on behalf of ANA, its Director President; (b) on behalf of MMA,

the Minister of MMA; (c) on behalf of MI, the Minister of MI; (d) on behalf of

Mcid, the Minister of Mcid.

2.03. The Front-end Fee payable by the Borrower shall be equal to one quarter of one

percent (0.25%) of the Loan amount.

2.04. The interest payable by the Borrower for each Interest Period shall be at a rate

equal to the Reference Rate for the Loan Currency plus the Variable Spread;

provided, that upon a Conversion of all or any portion of the principal amount of

the Loan, the interest payable by the Borrower during the Conversion Period on

such amount shall be determined in accordance with the relevant provisions of

Article IV of the General Conditions. Notwithstanding the foregoing, if any

amount of the Withdrawn Loan Balance remains unpaid when due and such non-

payment continues for a period of thirty days, then the interest payable by the

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Borrower shall instead be calculated as provided in Section 3.02 (e) of the

General Conditions.

2.05. The Payment Dates are June 1 and December 1 in each year.

2.06. The principal amount of the Loan shall be repaid in accordance with the

amortization schedule set forth in Schedule 3 to this Agreement.

2.07. (a) The Borrower may at any time, in each case with the prior no objection

of the Borrower, through its Secretariat of the National Treasury, request

any of the following Conversions of the terms of the Loan in order to

facilitate prudent debt management: (i) a change of the Loan Currency of

all or any portion of the principal amount of the Loan, withdrawn or

unwithdrawn, to an Approved Currency; (ii) a change of the interest rate

basis applicable to all or any portion of the principal amount of the Loan

withdrawn and outstanding from a Variable Rate to a Fixed Rate, or vice

versa or from a Variable Rate based on a Variable Spread to a Variable

Rate based on a Fixed Spread; and (iii) the setting of limits on the

Variable Rate applicable to all or any portion of the principal amount of

the Loan withdrawn and outstanding by the establishment of an Interest

Rate Cap or Interest Rate Collar on the Variable Rate.

(b) Any conversion requested pursuant to paragraph (a) of this Section that

is accepted by the Bank shall be considered a “Conversion”, as defined

in the General Conditions, and shall be effected in accordance with the

provisions of Article IV of the General Conditions and of the Conversion

Guidelines.

(c) Promptly following the Execution Date for an Interest Rate Cap or

Interest Rate Collar for which the Borrower has requested that the

premium be paid out of the proceeds of the Loan, the Bank shall, on

behalf of the Borrower, withdraw from the Loan Account and pay to

itself the amounts required to pay any premium payable in accordance

with Section 4.05 (c) of the General Conditions up to the amount

allocated from time to time for the purpose in the table in Section IV of

Schedule 2 to this Agreement.

ARTICLE III — PROJECT

3.01. The Borrower declares its commitment to the objective of the Project. To this

end, the Borrower shall:

(a) carry out Part 1 of the Project through MMA and ANA;

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(b) carry out Part 2 of the Project through MI;

(c) carry out Part 3 of the Project through MCid; and

(d) carry out Part 4 and Part 5 of the Project through ANA, MMA, MI and

MCid (each within their respective area of autonomy and competence),

all in accordance with the provisions of Article V of the General

Conditions.

3.02. Without limitation upon the provisions of Section 3.01 of this Agreement, and

except as the Borrower and the Bank shall otherwise agree, the Borrower shall

ensure that the Project is carried out in accordance with the provisions of

Schedule 2 to this Agreement.

ARTICLE IV — REMEDIES OF THE BANK

4.01. The Additional Event of Suspension consists of the following, namely that the

Comitê Gestor do Programa shall have ceased to exist or its functions and

structure shall have been modified so as to affect materially and adversely, in the

opinion of the Bank, the ability of the Borrower to perform any of its obligations

under this Agreement.

ARTICLE V — EFFECTIVENESS; TERMINATION

5.01. The Additional Conditions of Effectiveness consist of the following:

(a) The regulations creating the Comitê Gestor do Programa and the Project

Management Units have been issued and published in form and

substance satisfactory to the Bank.

(b) The Operational Manual has been adopted through a resolution

(deliberação) issued by the Comitê Gestor do Programa and published

by the Borrower in form and substance satisfactory to the Bank.

5.02. The Additional Legal Matter consists of the following, namely that that the Loan

has been registered with the Borrower’s Central Bank.

5.03. Without prejudice to the provisions of the General Conditions, the Effectiveness

Deadline is the date ninety (90) days after the date of this Agreement, but in no

case later than the eighteen (18) months after the Bank’s approval of the Loan

which expire on January 11, 2013.

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ARTICLE VI — REPRESENTATIVE; ADDRESSES

6.01. Except as provided in Section 2.02 of this Agreement, the Borrower’s

Representative is its Minister of Finance.

6.02. The Borrower’s Address is:

Ministério da Fazenda

Procuradoria-Geral da Fazenda Nacional

Esplanada dos Ministérios, Bloco "P" - 8º andar

Brasília, DF, 70048-900

Brazil

Facsimile: (55-61) 3412-1740

With copies to:

SEAIN - Secretaria de Assuntos Internacionais do

Ministério do Planejamento, Orçamento e Gestão

Esplanada dos Ministérios - Bloco K - 5º andar

Brasília, DF, 70040-906

Brazil

Facsimile: (55-61) 2020-5006

And to:

Ministério do Meio Ambiente – MMA

Secretaria Executiva

Esplanada dos Ministérios - Bloco Bl. B - 6º andar

Brasília, DF, 70068-900

Brazil

Facsimile: (55-61) 2028-1770/2015

Ministério da Integração Nacional – MI

Gabinete do Ministro

Esplanada dos Ministérios Bl. E Sala 800

Brasília, DF 70062-900

Brazil

Facsimile: (55-61) 3414-4268/5812

Ministério das Cidades – Mcid

Secretaria Executiva

SAUS Quadra 01 Bloco H Ed. Telemundi II, 12º andar

Brasília, DF, 70070-010

Brazil

Facsimile: (55-61) 2108-1420

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Agência Nacional de Águas - ANA

SPO, Área 05 Quadra 03 Bloco M

Brasília, DF, 70610-200

Brazil

Facsimile: (55-61) 2109-5296

6.03. The Bank’s Address is:

International Bank for Reconstruction and Development

1818 H Street, N.W.

Washington, D.C. 20433

United States of America

Cable address: Telex: Facsimile:

INTBAFRAD 248423(MCI) or 1-202-477-6391

Washington, D.C. 64145(MCI)

AGREED at Brasília, Federative Republic of Brazil, as of the day and year first above

written.

FEDERATIVE REPUBLIC OF BRAZIL

By/s/ Ana Lucia Gatto de Oliveira

Authorized Representative

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

By/s/ Makhtar Diop

Authorized Representative

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SCHEDULE 1

Project Description

The objective of the Project is to support the Borrower to improve the

coordination, and strengthen the capacity, among key federal institutions in the water

sector toward an integrated approach.

The Project consists of the following parts:

Part 1. Water Resources Management

Provision of support to the deployment of tools and instruments to SINGREH;

enhance institutional development; reduce the disparities between the Borrower’s federal

and states water management systems; identify actions to mitigate and adapt to climate

change; streamline procedures; and establish criteria for ongoing monitoring and

evaluation systems to increase efficiency and legal compliance of water resources

guidelines and policies with the Borrower’s 1997 Water Law No. 9433 dated January 8,

1997, which established the National Water Resources Policy, through:

(i) the carrying out of the following planning and management activities: (A)

assessing and supporting the modification of the legal framework for federal and state

water resources; (B) strengthening of the National Water Resources Plan and state and

river basin plans and agencies; (C) implementation and expansion of the water resources

monitoring network; (D) promoting the enforcement of water rights and charges; (E)

planning and implementation of a national program for water resources management

training; (F) implementation of a results based management system for the National

Water Resources Plan; and (G) technical support to integrated urban water management

including solid waste and management models;

(ii) the carrying out of the following studies to:(A) verify feasibility of water

projects; (B) monitor and assess groundwater potential; (C) implement demonstration

projects for water resource conservation and reuse, and rehabilitation plans; (D) prevent

and control of critical events including climate change; (E) develop hydrographic

mapping; (F) develop and modernize a water users and infrastructure registry; (G)

address topics such as the relationship between environmental degradation,

desertification, water resources, technologies for efficient water use, and impacts of

climate change on water resource availability, and influence of global macroeconomic

dynamics on water resources; and (H) development of financial mechanisms and tools for

environmental and water management, including solid waste; and

(iii) the carrying out of the following institutional development activities: (A) training

and strengthening of water resources management agencies, including water user

associations and water boards; (B) development and implementation of: (1) education

and social mobilization campaigns, and (2) communication and dissemination programs;

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(C) monitoring and improvement of SINGREH’s institutions capacity; (D) enhancement

of economic and financial sustainability of water resources management and water

resources policies and funding; (E) support to south-south cooperation in the water

sector; and (F) strengthening of urban, environmental and water institutions.

Part 2. Water, Irrigation and Disaster Risk Management

Provision of support for institutional strengthening to improve water

infrastructure, irrigation and SINDEC activities, and to raise the overall assessment

capacity of strategic existing water infrastructure and disaster risk management capacity,

including floods and droughts and other hazards, through:

(i) the carrying out of the following planning and management activities: (A)

assessment of federal and state water infrastructure plans in the Northeast Region; (B)

development of criteria for selecting water infrastructure projects; (C) preparation of state

and national irrigation plans with incentives to optimize irrigation systems; (D) creation

of a risk management information system; (E) development of a risk management plan,

including risk identification, monitoring and early warning systems, and emergency

response plans; (F) development of information systems for water infrastructure; and (G)

increase of strategic planning for drought risk reduction and climate change;

(ii) the carrying out of the following studies to: (A) verify the technical, economic,

social, financial, and environmental feasibility of water infrastructure activities; (B)

prepare water infrastructure management, operation and maintenance plans; (C) assess

existing water infrastructure; (D) develop dam safety plans; (E) promote social

participation; (F) develop plans for improvement of irrigation activities; (G) support the

implementation of the National Irrigation Policy; and (H) support disaster risk

management; and

(iii) the carrying out of the following institutional development activities: (A)

provision of technical support and capacity building to federal and state agencies to

enhance performance in water infrastructure, irrigation, and risk management areas; (B)

provision of technical assistance to implement: (1) water infrastructure management and

monitoring systems; (2) management plans for public irrigation projects; and (3) training

for irrigation user organizations; (C) acquisition and/or development of computer

programs for administration and management; (D) preparation of technical and

operational manuals for water infrastructure, irrigation and disaster risk management;

and (E) support to irrigation, water infrastructure and SINDEC agencies.

Part 3: Water Supply and Sanitation

Provision of support to the implementation of the Borrower’s 2007 National

Sanitation Law No. 11445, the improvement of the quality of the provision of water

supply and basic sanitation services and contribution to promote universal access to these

services through:

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(i) the carrying out of the following planning and management activities: (A)

support to the implementation of the National Basic Sanitation Guidelines and of

SINISA; (B) assessment of PAC investments in water supply and basic sanitation

infrastructure; (C) development of a national technical cooperation in the water supply

and basic sanitation areas; (D) development and expansion of a training, research and

technology national network in water supply and basic sanitation (E) preparation of local

and regional water supply and basic sanitation plans for states and municipalities; and (F)

review and evaluation of programs and actions included in PPA and PAC;

(ii) the carrying out of the following studies to: (A) improve the assessment capacity

on technical, economic, financial, policy, institutional and management matters; (B)

contribute to the monitoring and evaluation of public policies; (C) improve “COM +

ÁGUA” Project; (D) expand the Integrated Management System for Water Supply and

Sanitation; (E) integrate, expand, and upgrade PMSS systems; (E) expand integrated

water supply and basic sanitation services technology in slum areas; (F) adopt clean

development mechanisms for water supply and basic sanitation; and (G) disseminate

technology; and

(iii) the carrying out of the following institutional development activities: (A) support

to the integration of PAC-financed projects and institutional development of services

providers; (B) provision of technical assistance to states, municipalities, regulators, and

service providers for sector modernization; (C) incentive to associated management of

water supply and basic sanitation services; (D) development of local or regional water

supply and basic sanitation plans; (E) support, development and dissemination of

transparency instruments and promotion of social participation; and (F) review of water

supply and basic sanitation environmental licensing regulations.

Part 4: Intersectoral Coordination and Integrated Planning

Provision of support to integrated planning; identification of areas of mutual

interest, overlap, or conflict in the sectoral plans which impact and/or depend upon water;

carrying out of studies and institutional improvements involving multiple sectors, and

support to water management and conservation measures preferentially in the São

Francisco and the Araguaia-Tocantins river basins, through:

(i) the carrying out of the following planning and management activities: (A)

improvement of water management and use associated with the Integration Project in the

São Francisco River Basin; (B) integration of planning and regulation in the water

resources and water supply and basic sanitation sectors and in the energy and navigation

sectors; (C) implementation of methods to integrate river basin environmental assessment

for planning in the hydroelectric, river navigation and water supply and sanitation sectors

at the state and municipality level; and (D) development and implementation of systems

and methodologies to monitor and evaluate policies and public investments in the water

sector;

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(ii) the carrying out of the following studies to: (A) evaluate alternatives to integrate

procedures for water rights, emission of environmental licenses, environmental planning,

and provision of public services; (B) rehabilitate river basins; (C) improve energy

efficiency; (D) develop water conservation and reuse projects; (E) promote efficiency

technologies and develop a methodology for certification of the proper use of water in

irrigated agriculture; (F) control and measure water quality; (G) create clean development

mechanisms; (H) assess and develop payment for environmental services; (I) systematize

the database of existing engineering designs and works; and (J) identify projects to

encourage rational and efficient water use; and

(iii) the carrying out of the following institutional development activities:(A)

coordination of methods, evaluation systems, and decision support in sectors where water

resources are fundamental inputs; (B) coordination and communication among sector

information systems; (C) support to the establishment of permanent mechanisms and

structures for articulation and coordination of federal government actions in the water

sector; and (D) training of federal, state and municipality water professionals on Project

related activities.

Part 5: Project Management, Monitoring, and Evaluation

Provision of support to: (i) the management of the operational aspects of the

Project in order to coordinate, monitor, and evaluate all of the interventions undertaken to

ensure that they meet the targets, timetables, and objectives originally specified and to

ensure overall efficient administration including reporting, financial management, and

auditing of the Project; and (ii) the effective transfer of knowledge and the use of best

practices at the subnational level including a strong communication program, through,

inter alia, workshops and seminars to inform the relevant stakeholders at the river basin,

municipal, state, and federal levels.

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SCHEDULE 2

Project Execution

Section I. Implementation Arrangements

A. Institutional Arrangements

1. The Borrower shall, through ANA, MMA, MI and MCid (each within their

respective area of autonomy and competence), carry out the Project in

accordance with the Operational Manual, including the Procurement Plan, the

Annual Operating Plans, the Environmental Management Framework and the

Social Framework, and except as the Bank shall otherwise agree, shall not amend

or waive any provision of these documents without the Bank’s prior written

approval. In case of any conflict between the terms of said documents and those

of this Agreement, the terms of this Agreement shall prevail.

2. The Borrower shall establish and thereafter maintain, until the completion of the

execution of the Project, an interministerial management committee (the Comitê

Gestor do Programa) to convene at least once every semester, and shall submit

the minutes of said meetings to the Bank.

3. The Borrower shall establish, and thereafter operate and maintain, until the

completion of the execution of the Project, Project management units (the

Project Management Units) physically located in ANA, MMA, MI and MCid, all

with competent staff in adequate numbers with qualifications and experience

satisfactory to the Bank and selected in accordance, as applicable, with the

provisions of Section III of this Schedule, including in each of said units the

following key staff: a Project coordinator, a technical manager, a financial

management specialist, a procurement specialist, and whenever necessary a

social safeguard specialist and an environmental safeguard specialist.

4. The Borrower shall establish no later than three months after the establishment

of the Comitê Gestor do Programa and thereafter maintain, until the completion

of the execution of the Project, a Project technical Secretariat for the Comitê

Gestor do Programa (the Project Technical Secretariat), to be physically located

in ANA, and in charge of overall Project coordination, including all intersectoral

activities as set forth in the Operational Manual.

5. The Borrower shall, at least once a year during Project implementation on or

about December 1, commencing on the first such date after the Effective Date,

prepare and furnish to the Bank a plan, acceptable to the Bank (the Annual

Operating Plan for the Project’s operation during the following twelve months).

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6. For purposes of carrying out its procurement obligations under the Project, the

Borrower, through ANA, MMA, MI and MCid (each within their respective area

of autonomy and competence) may enter into an agreement with an entity with

qualifications and procurement experience acceptable to the Bank, under terms

and conditions satisfactory to the Bank (the Procurement Agent Agreement),

which shall include, inter alia: (a) the obligation of the Procurement Agent (on

behalf of the Borrower): (A) to carry out the procurement of certain goods,

consultants’ services and Services (other than Consultants’ Services) under the

Project in accordance with the provisions set forth in Section III of this Schedule

and in the Operational Manual ; and (B) to keep separate records and accounts in

respect of such goods, consultants’ services and Services (other than

Consultants’ Services) and to assist the Borrower in complying with its

obligations under this Agreement; (b) the obligation of the Borrower: (A) to

transfer directly to the Procurement Agent the proceeds of the Loan allocated to

Category (1) as required by the Procurement Agent to effect the payments for

goods, consultants’ services and Services (other than Consultants’ Services)

under the Project; (B) to transfer to the Procurement Agent the Project

counterpart funds (i.e., non-Loan funds) as required for the Procurement Agent

to effect the payments for goods, consultants’ services and Services (other than

Consultants’ Services) under the Project; and (C) to pay any administrative fees

due to the Procurement Agent under the Procurement Agent Agreement.

B. Anti-Corruption

The Borrower shall ensure that the Project is carried out in accordance with the

provisions of the Anti-Corruption Guidelines.

C. Cooperation Agreements

1. The Borrower, through ANA, MMA, MI or MCid, shall, prior to carrying out any

Project activity which requires the assistance of a Participating Entity (as

determined by the Borrower in accordance with the provisions of the Operational

Manual), enter into an agreement (the Cooperation Agreement) with the relevant

Participating Entity under terms and conditions approved by the Bank as further

specified in the Operational Manual for purposes of assisting ANA, MMA, MI or

MCid in the implementation of the respective Parts of the Project under their

responsibility, and thereafter maintain the pertinent Cooperation Agreement

throughout the implementation of the Project.

2. The Borrower, through ANA, MMA, MI or MCid, shall exercise its rights and

carry out its obligations under each Cooperation Agreement in such manner as to

protect the interests of the Borrower and the Bank and to accomplish the

purposes of the Loan. Except as the Bank shall otherwise agree, the Borrower

shall not assign, amend, abrogate, terminate, waive or fail to enforce any

Cooperation Agreement or any provision thereof.

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D. Safeguards - Environmental Management Framework and Social

Framework

1. The Borrower shall, through the Project Management Units: (a) implement the

Project in accordance with the Environmental Management Famework (including

provisions for environmental assessment, natural habitats, pest management,

forests, chance finding of cultural property and safety of dams) and the Social

Management Framework (including provisions for indigenous peoples and

involuntary resettlement); and (b) adopt the procedures detailed in said

Environmental Management Framework and Social Management Framework for

environmental and social screening, evaluation, implementation and monitoring

of the Project.

2. The Borrower, through, ANA, MMA, MI or MCid, shall ensure, and/or cause the

Participating Entities to ensure, that the terms of reference for any consultancy in

respect of any Project activity shall be satisfactory to the Bank following its

review thereof and, to that end, such terms of reference shall duly incorporate the

requirements of the Bank Safeguards Policies then in force, as applied to the

advice conveyed through such technical assistance.

Section II. Project Monitoring Reporting and Evaluation

A. Project Reports

1. The Borrower, through each Project Management Unit, shall monitor and

evaluate the progress of the Project and prepare Project Reports in accordance

with the provisions of Section 5.08 of the General Conditions and on the basis of

the performance indicators set forth in the Operational Manual. Each Project

Report shall cover the period of one calendar semester, and shall be furnished to

the Project Technical Secretariat to be consolidated and furnished to the Bank not

later than forty-five days after the end of the period covered by such report.

2. For purposes of Section 5.08 (c) of the General Conditions, the report on the

execution of the Project and related plan required pursuant to that Section shall

be furnished to the Bank not later than six months after the Closing Date.

B. Financial Management, Financial Reports and Audits

1. The Borrower shall maintain or cause to be maintained a financial management

system in accordance with the provisions of Section 5.09 of the General

Conditions.

2. Without limitation on the provisions of Part A of this Section, ANA, MMA, MI

and MCid shall prepare and furnish to the Project Technical Secretariat interim

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unaudited financial reports for the Project covering the quarter, in form and

substance satisfactory to the Bank, which shall be consolidated and sent to the

Bank not later than forty-five days after the end of each calendar quarter.

3. The Borrower shall have its Financial Statements audited in accordance with the

provisions of Section 5.09 (b) of the General Conditions. Each audit of the

Financial Statements shall cover the period of one fiscal year of the Borrower,

commencing with the fiscal year in which the first withdrawal was made under

the Project. The audited Financial Statements for each such period shall be

furnished to the Bank not later than six months after the end of such period.

Section III. Procurement

A. General

1. Goods, and Services (Other than Consultants’ Services). All goods and

services (other than consultants’ services) required for the Project and to be

financed out of the proceeds of the Loan shall be procured in accordance with the

requirements set forth or referred to in Section I of the Procurement Guidelines,

and with the provisions of this Section.

2. Consultants’ Services. All consultants’ services required for the Project and to

be financed out of the proceeds of the Loan shall be procured in accordance with

the requirements set forth or referred to in Sections I and IV of the Consultant

Guidelines and with the provisions of this Section.

3. Definitions. The capitalized terms used below in this Section to describe

particular procurement methods or methods of review by the Bank of particular

contracts refer to the corresponding method described in the Procurement

Guidelines, or Consultant Guidelines, as the case may be.

B. Particular Methods of Procurement of Goods and Services (Other than

Consultants’ Services)

1. International Competitive Bidding. Except as otherwise provided in paragraph

2 below, goods and services (other than consultants’ services) shall be procured

under contracts awarded on the basis of International Competitive Bidding.

2. Other Methods of Procurement of Goods and Services (Other than

Consultants’ Services). The following table specifies the methods of

procurement, other than International Competitive Bidding, which may be used

for goods and services (other than consultants’ services). The Procurement Plan

shall specify the circumstances under which such methods may be used.

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Procurement Method

(a) National Competitive Bidding, subject to the following additional procedure,

namely, that the bidding documents shall be acceptable to the Bank as well as

procurement in accordance with the method known as “pregão eletrônico”, as

provided in the Borrower’s Law No. 10520, of July 17, 2002, and in Decree No.

5450 of May 31, 2005, under COMPRASNET (the Borrower’s procurement portal

or any other e-procurement system approved by the Bank), subject to the following

additional procedure, namely, that the bidding documents shall be acceptable to the

Bank.

(b) Shopping including in respect of goods and services, pregão eletrônico set forth in

Borrower’s Law No. 10520, of July 17, 2002, and in Decree No. 5450 of May 31,

2005.

(c) Direct Contracting

C. Particular Methods of Procurement of Consultants’ Services

1. Quality- and Cost-based Selection. Except as otherwise provided in paragraph

2 below, consultants’ services shall be procured under contracts awarded on the

basis of Quality and Cost-based Selection.

2. Other Methods of Procurement of Consultants’ Services. The following table

specifies the methods of procurement, other than Quality and Cost-based

Selection, which may be used for consultants’ services. The Procurement Plan

shall specify the circumstances under which such methods may be used.

Procurement Method

(a) Quality-based Selection

(b) Selection under a Fixed Budget

(c) Least Cost Selection

(d) Selection based on the Consultants’ Qualifications

(e) Single-Source Selection

(f) Procedures set forth in Paragraphs 5.2 and 5.3 of the Consultant Guidelines for the

Selection of Individual Consultants

(g) Sole Source Procedures for the Selection of Individual Consultants set forth in

paragraph 5.4 of the Consultant Guidelines for the Selection of Individual

Consultants

D. Review by the Bank of Procurement Decisions

The Procurement Plan shall set forth those contracts which shall be subject to the

Bank’s Prior Review. All other contracts shall be subject to Post Review by the

Bank.

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Section IV. Withdrawal of Loan Proceeds

A. General

1. The Borrower may withdraw the proceeds of the Loan in accordance with the

provisions of Article II of the General Conditions, this Section, and such

additional instructions as the Bank shall specify by notice to the Borrower

(including the “World Bank Disbursement Guidelines for Projects” dated May

2006, as revised from time to time by the Bank and as made applicable to this

Agreement pursuant to such instructions), to finance Eligible Expenditures as set

forth in the table in paragraph 2 below.

2. The following table specifies the categories of Eligible Expenditures that may be

financed out of the proceeds of the Loan (“Category”), the allocation of the

amounts of the Loan to each Category, and the percentage of expenditures to be

financed for Eligible Expenditures in each Category.

Category Amount of the Loan

Allocated

(expressed in USD)

Percentage of

Expenditures to be

financed

(inclusive of Taxes)

(1) Goods, Consultants’

Services, Services

(Other than Consultants’

Services) Training and

Operating Costs for the

Project

107,064,168

100%

(2) Front-end Fee

268,332

Amount payable pursuant

to Section 2.03 of this

Agreement in accordance

with Section 2.07 (b) of the

General Conditions

(3) Premium for Interest

Rate Caps and Collars

0 Amount payable pursuant

to Section 2.07 (c) of this

Agreement

TOTAL AMOUNT 107,332,500

3. For the purposes of this table:

(a) the term “Operating Costs” means the operational costs (which would

not have occurred absent the Project, including, inter alia, equipment and

computer maintenance, office supplies, utilities, and rent for office

facilities) and the supervision and monitoring costs of the Project

incurred by the Project Management Units, the Comitê Gestor do

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Programa and the Project Technical Secretariat under the Project

(including, inter alia, travel, per diem, accommodation, operation and

maintenance of vehicles, repairs, fuel, spare parts and insurance,

maintenance of the monitoring and information system, supervisory and

quality control activities, but excluding expenditures for civil servant

salaries and related benefits);

(b) the term “Training” means the costs, which would not have occurred

absent the Project, including, inter alia, information workshops, study

tours, and training programs, equipment required for training purposes

and the travel, per diem and accommodation costs for technical staff of

the Project Management Units, but excluding expenditures for civil

servant salaries and related benefits; and

(c) the term “Services (other than Consultants’ Services)” means the costs of

services which are not consultants’ services, including, inter alia, the

costs of surveys, data collection and processing, printing services,

publications and dissemination activities and travel agencies services.

B. Withdrawal Conditions; Withdrawal Period

1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be

made for payments made prior to the date of this Agreement, except that

withdrawals up to an aggregate amount not to exceed $10,733,250 equivalent

may be made for payments made within twelve months prior to such date for

Eligible Expenditures under Category (1).

2. The Closing Date is December 31, 2016. The Bank shall only grant an extension

of the Closing Date after the Borrower’s Ministry of Finance has informed the

Bank that it agrees with such extension.

Section V. Other Undertakings

By July 31, 2014, or such other date as the Bank shall agree upon, the Borrower shall:

1. carry out jointly with the Bank, a mid-term review of the implementation of the

Project (Midterm Review). The Midterm Review shall cover the progress

achieved in the implementation of the Project; and

2. following such Midterm Review, act promptly and diligently to take any

corrective action as shall be agreed between the Borrower and Bank.

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SCHEDULE 3

Amortization Schedule

1. The following table sets forth the Principal Payment Dates of the Loan and the

percentage of the total principal amount of the Loan payable on each Principal

Payment Date (“Installment Share”). If the proceeds of the Loan have been fully

withdrawn as of the first Principal Payment Date, the principal amount of the

Loan repayable by the Borrower on each Principal Payment Date shall be

determined by the Bank by multiplying: (a) Withdrawn Loan Balance as of the

first Principal Payment Date; by (b) the Installment Share for each Principal

Payment Date, such repayable amount to be adjusted, as necessary, to deduct any

amounts referred to in paragraph 4 of this Schedule, to which a Currency

Conversion applies.

Principal Payment Date Installment Share

(Expressed as a Percentage)

On each June 1 and December 1

Beginning December 1, 2016

through June 1, 2041

2%

2. If the proceeds of the Loan have not been fully withdrawn as of the first Principal

Payment Date, the principal amount of the Loan repayable by the Borrower on

each Principal Payment Date shall be determined as follows:

(a) To the extent that any proceeds of the Loan have been withdrawn as of

the first Principal Payment Date, the Borrower shall repay the

Withdrawn Loan Balance as of such date in accordance with paragraph 1

of this Schedule.

(b) Any amount withdrawn after the first Principal Payment Date shall be

repaid on each Principal Payment Date falling after the date of such

withdrawal in amounts determined by the Bank by multiplying the

amount of each such withdrawal by a fraction, the numerator of which is

the original Installment Share specified in the table in paragraph 1 of this

Schedule for said Principal Payment Date (“Original Installment Share”)

and the denominator of which is the sum of all remaining Original

Installment Shares for Principal Payment Dates falling on or after such

date, such amounts repayable to be adjusted, as necessary, to deduct any

amounts referred to in paragraph 4 of this Schedule, to which a Currency

Conversion applies.

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3. (a) Amounts of the Loan withdrawn within two calendar months prior to any

Principal Payment Date shall, for the purposes solely of calculating the

principal amounts payable on any Principal Payment Date, be treated as

withdrawn and outstanding on the second Principal Payment Date

following the date of withdrawal and shall be repayable on each

Principal Payment Date commencing with the second Principal Payment

Date following the date of withdrawal.

(b) Notwithstanding the provisions of sub-paragraph (a) of this paragraph, if

at any time the Bank adopts a due date billing system under which

invoices are issued on or after the respective Principal Payment Date, the

provisions of such sub-paragraph shall no longer apply to any

withdrawals made after the adoption of such billing system.

4. Notwithstanding the provisions of paragraphs 1 and 2 of this Schedule, upon a

Currency Conversion of all or any portion of the Withdrawn Loan Balance to an

Approved Currency, the amount so converted in the Approved Currency that is

repayable on any Principal Payment Date occurring during the Conversion

Period, shall be determined by the Bank by multiplying such amount in its

currency of denomination immediately prior to the Conversion by either: (i) the

exchange rate that reflects the amounts of principal in the Approved Currency

payable by the Bank under the Currency Hedge Transaction relating to the

Conversion; or (ii) if the Bank so determines in accordance with the Conversion

Guidelines, the exchange rate component of the Screen Rate.

5. If the Withdrawn Loan Balance is denominated in more than one Loan Currency,

the provisions of this Schedule shall apply separately to the amount denominated

in each Loan Currency, so as to produce a separate amortization schedule for

each such amount.

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APPENDIX

Section I. Definitions

1. “ANA” means Agência Nacional de Águas, the Borrower’s National Water

Agency, as existing and operating under the Borrower’s Law No. 9984, dated

July 17, 2000, or any successor thereto acceptable to the Bank.

2. “Annual Operating Plan” means any of the plans referred to in Section I.A.5 of

Schedule 2 to this Agreement, which shall contain the activities to be

implemented during the Borrower’s fiscal year with the respective resources and

in accordance with the Borrower’s annual budgetary law.

3. “Anti-Corruption Guidelines” means the “Guidelines on Preventing and

Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA

Credits and Grants”, dated October 15, 2006, and revised in January 2011.

4. “Bank Safeguards Policies” means the Bank’s operational policies and

procedures set forth in the Bank’s Operational Manual under OP/BPs 4.01, 4.04,

4.09, 4.10, 4.11, 4.12, 4.36, 4.37, 7.50 and 7.60 as said manual is published under

www.WorldBank.org/opmanual.

5. “Category” means a category set forth in the table in Section IV of Schedule 2 to

this Agreement.

6. “COM + ÁGUA Project” means the Borrower’s main initiative under the PMSS,

whose objective is to prevent water losses and promoting the efficient use of

electric energy in water supply systems by proposing integrated and participatory

management and social mobilization.

7. “Comitê Gestor do Programa” means the interministerial committee referred to

in Section I.A.3 of Schedule 2 to this Agreement in charge of overall

coordination for the Project as further detailed in the Operational Manual.

8. “Consultant Guidelines” means the “Guidelines: Selection and Employment of

Consultants by World Bank Borrowers” published by the Bank in May 2004, and

revised in October 2006, and May 2010.

9. “Cooperation Agreement” means any of the agreements referred to in Section

I.C.1 of Schedule 2 to this Agreement.

10. “Environmental Management Framework” means the Borrower’s framework

dated August, 2010, acceptable to the Bank (included in the Operational

Manual), and published and available to the public on the website

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http://interaguas.ana.gov.br which contains, inter alia, the environmental

principles and policies that shall apply to the implementation of the Project.

11. “General Conditions” means the “International Bank for Reconstruction and

Development General Conditions for Loans”, dated July 31, 2010.

12. “Integrated Management System for Water Supply and Sanitation - GSAN”

means the Borrower’s main initiative under the PMSS, whose objective is to

make commercial and operational management of water supply and basic

sanitation services through a public and open software.

13. “Integration Project in the São Francisco River Basin” means the Borrower’s

initiative for integrating the São Francisco River Basin with basins in the States

of Ceará, Rio Grande do Norte, Paraíba and Pernambuco.

14. “MCid” means Ministério das Cidades, the Borrower’s Ministry for Cities, or

any successor thereto acceptable to the Bank.

15. “MI” means Ministério da Integração Nacional, the Borrower’s Ministry for

National Integration, or any successor thereto acceptable to the Bank.

16. “MMA” means Ministério do Meio Ambiente, the Borrower’s Ministry for

Environment, or any successor thereto acceptable to the Bank.

17. “National Basic Sanitation Guidelines” means the Borrower’s national water

supply, wastewater, urban drainage and solid waste management guidelines as

established under the Borrower’s Law No. 11445 dated January 5, 2007.

18. “National Irrigation Policy” means the Borrower’s national irrigation policy as

established under the Borrower’s Law No. 6662, dated 1979, as amended.

19. “National Water Resources Plan” means a planning instrument approved by the

Borrower’s National Council of Water Resources for the water resource sector

established under the Council’s Resolution No. 58 dated January 30, 2006.

20. “National Water Resources Policy” means the Borrower’s national water

resource policy as established under the Borrower’s Law No. 9433 dated January

8, 1997.

21. “Northeast Region” means a geographic region in the Borrower’s territory that

comprises the following States: Alagoas, Bahia, Ceará, Maranhão, Paraíba,

Pernambuco, Piauí, Rio Grande do Norte and Sergipe.

22. “Operational Manual” means the operational manual for the Project, satisfactory

to the Bank, to be adopted by the Borrower through a resolution of the Comitê

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Gestor do Programa, which manual shall contain, inter alia: (i) the terms of

reference, functions and responsibilities for the personnel of: (A) the Project

Implementation Units; (B) the Project Technical Secretariat; and (C) the Comitê

Gestor do Programa; (ii) the procedures for procurement of goods, consultants’

services and services (other than Consultants’ Services) for the Project, as well as

for financial management and procurement audits of the Project; (iii) flow and

disbursement arrangements of Project funds; (iv) the Annual Operating Plan for

the first year of the Project; and (v) the Environmental Management Framework

and the Social Management Framework.

23. “PAC” means Programa de Aceleração do Crescimento, the Borrower’s growth

acceleration program as established under the Borrower’s Law No. 11578 dated

November 26, 2007.

24. “Participating Entity” means any federal, state and municipal institution, river

basin agencies and water and basic sanitation service providers that have

requested support from the Project and demonstrated a strong commitment to

advance reforms and improve performance in the water sector in the Borrower’s

territory.

25. “PMSS” means the Borrower’s Water Sector Modernization Program (PMSS),

which provides technical assistance to the actions of the National Secretariat of

Sanitation under the MCid.

26. “PPA” means the Borrower’s Multiyear Plan, which is approved by the Congress

every four years, including programs to be implemented over the following four

years.

27. “Procurement Agent” means the procurement agent referred to in Section I.A.6

of Schedule 2 to this Agreement.

28. “Procurement Agent Agreement” means the agreement referred to in Section

I.A.6 of Schedule 2 to this Agreement.

29. “Procurement Guidelines” means the “Guidelines: Procurement under IBRD

Loans and IDA Credits” published by the Bank in May 2004, and revised in

October 2006, and May 2010.

30. “Procurement Plan” means the Borrower’s procurement plan for the Project,

dated May 21, 2011, and referred to in paragraph 1.16 of the Procurement

Guidelines and paragraph 1.24 of the Consultant Guidelines, as the same shall be

updated from time to time in accordance with the provisions of said paragraphs.

31. “Project Management Units” means the four management units referred to in

Section I.A.2 of Schedule 2 to this Agreement.

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32. “Project Technical Secretariat” means the secretariat within ANA referred to in

Section I.A.4 of Schedule 2 to this Agreement in charge of serving as a technical

secretariat to the Comitê Gestor do Programa.

33. “SINDEC” means Sistema Nacional de Defesa Civil, the Borrower’s system that

coordinates and plans the national disaster risk management activities, as

established under the Borrower’s Law No.12340, dated September 1, 2010.

34. SINGREH means Sistema Nacional de Gerenciamento de Recursos Hídricos, the

Borrower’s national system of water resources management as established under

the Borrower’s Law No. 9433, dated January 8, 1997.

35. “SINISA” means Sistema Nacional de Informações em Saneamento Básico, the

Borrower’s national information system on water supply and basic sanitation as

established under the Borrower’s Law No. 11445, dated January 5, 2007.

36. “Social Management Framework” means the Borrower’s framework dated

September, 2010, acceptable to the Bank (included in the Operational Manual),

and published and available to the public on the website

http://interaguas.ana.gov.br which contains, inter alia, the social principles and

policies that shall apply to the implementation of the Project.